Waiting list to purchase a new home?!

Yesterday I spent some time searching for and looking at homes (resales) with clients. When only three properties fitting their criteria were returned from our search of the MLS – and after viewing those properties and finding them not suitable to my clients – we decided to visit the new home builders in the area.

The story we got from the salespersons was same wherever we went: they been placing many properties into contract in the last couple weeks; they have little to no inventory; and waiting lists exist for future releases. Yes, waiting lists!

When was the last time this market has heard that term? One builder required prospective purchasers to first get pre-qualified through its preferred lender prior to being placed on the waiting list. My clients went through the process and were placed in 8th position on a waiting list for a forthcoming release of three new lots and homes.

They’re crossing their fingers that majority of the buyers in positions 1 through 7 decide not to purchase.

44 comments

  1. Carol

    Guy, if a house builder is building three houses at a time, is it really all that mystfiying that there might be a “waiting list”?

  2. Matthew

    At what price point, Guy?

  3. Cal

    Guy I am curious about what price point your clients were looking at that returned only 3 properties. Can you share that info?
    Thanks.

  4. Guy Johnson

    Carol, agreed – in light of the current market – but not too long ago builders were unable to move any new product.

    Matthew and Cal, these clients are looking in the $200,000 – $250,000 range.

  5. tyler durden

    i have some office space i can sell them

  6. Norton

    Hmmm…..as of 5 minutes ago, there were 313 SFR listings between $200K and $250K in Reno-Sparks.
    126 of those listings were showing as active with nothing pending.

  7. Friday

    Norton, if you want to buy a house between $200K and $250K in the Old Northwest, with a southern exposure, 2.5 bathrooms, single story, with 3 bedrooms, within walking distance to schools, and with a 3 car garage, there are only 3 that meet your criteria. If you don’t like them, then you have to buy new.

  8. Twister

    Thee password for today is…………..hibernation.

  9. Zen

    So now what? Are the builders going to ramp up production to fill this void caused by AB 284? Will the banks figure out how to get around AB 284 just about the same time the builders reach full production? With no where left to go but up, will interest rates start rising? Maybe them Californians will even start moving here in droves again. It’s like deja vu all over again. Yippee!

  10. Twister

    I dont have all the answers but I do know this, its a heck of a lot better than where we’ve been!

  11. tyler durden

    median 170K ??

  12. Twister

    170K sounds good to me!

  13. Zen

    You must be an owner not a buyer.

  14. Twister

    Yes I am an owner and am down about 15% from where I bought.

  15. Zen

    Only 15% down, I’d say you’ve done OK. I wouldn’t get too nervous. You must have bought not too long ago. You should do just fine in the long run.

  16. E.Eward

    Its pre-sold build as you go…..No way builders jump-in with both feet to fill the gap!
    Not with the overhang.
    These moratoriums have been tried before and obviously don’t work!

  17. Twister

    Thanks!

  18. GratefulD_420

    OMG! That’s totally cool. A waiting list? I would really like to be on one of those! If everyone wants one.. then I totally do too! Not only a waiting list but even a pre-qualification! Wow this totally must be exclusive territory that I’ve been waiting for all my life to be apart of!

    Wow Guy. This is a sad day. The cool-aid HAS consumed you. Your blog sounded like a teenage girl trying to get into a party at a frat house. It’s so hard to get in… I’ll cross my fingers…and hope, just hope if I spend all my money and put out that they will accept me.

    Have you informed your clients about the conditions of the market? Have you discussed the AB 284? What the potential outcomes are? Or is that bad for current business? If they need to buy NOW… then yes the inventory has shrunk from all-time levels; but is nowhere close to having to get excited about a “waiting list.”

    Honestly I think prices will rise in the short term since available inventory is historically (within the last few years) low, interest rates threaten to pick up quickly however YET nothing in RENO economy has changed much (economy, employment, wages, population, unresolved delinquent mortgages, shadow inventory, pending foreclosures, etc.)…. so I suspect the end result will be the next bottom.

    Zen is right on point with “the void of AB 284,” to this next unfolding disaster… but unfortunately we do not know when since it is political and not market driven.

    Friday is a Realtor on cool-aid. If you want…”between $200K and $250K in the Old Northwest, with a southern exposure, 2.5 bathrooms, single story, with 3 bedrooms, within walking distance to schools, and with a 3 car garage, there are only 3 that meet your criteria. If you don’t like them, then you have to buy new.” BLAH BLAH BLAH.
    1. Is anyone building in the old Northwest with northern exposures? If you haven’t heard there is a destruction zone called Somerset with plenty of those… just not quite the “OLD” North West where they ARE NOT building.
    2. If you want to buy this exact spec… then get in line! OR go to Zillow “make me move,” and you will find plenty of delusional folks.

  19. Skippy

    I’m paying close attention to the 140k-200k market and as Guy says, there is almost no available desirable inventory without some kind of pending status. Some people seem eager to pretend it’s not happening, but that reality is now here as has been speculated about for 6 months here on RRB. It’s now a very interesting time in the Reno market short term until AB284 is fixed or circumvented.

  20. MJD

    Noticed some changes in my Golden Valley neighborhood in price per square foot on homes listed for sale. Two newly constructed homes which were move-in ready last fall are now in pending status, and listed at $1.15-1.25/sf (will have to wait for the actual sale price to see if those prices were able to hold). Short and regular sales are listed at $.90-1.10/sf and are mixed active/pendings, while bank owned properties languish at $.75-.80/sf. With the exception of the REO’s, there seems to be a modest increase in my neighborhood’s price per square foot–and if these homes are receiving multiple offers and sell near or even above the listing price, overall home values in this area may rebound a bit for the next few months.

  21. Sully

    E.Eward (?) actually moratoriums do work but they have to be long term and not artificial. Santa Clara County enacted a building moratorium in the 70’s after the builders descended like locust in the 60’s and built out every tomato farm and vacant lot they could find. Very similar to what is (was) happening in this area with new developments springing up like weeds.

    Cost of housing in Santa Clara County is now the highest in the country. Add the fact it’s also the home of Hi Tech and has high paying JOBS! available this trend will not change anytime soon. During the recent downturn (especially since the dot.com bomb) prices went down but no where near as much as they are down here.

    AB 284 isn’t really anything new as it requires the banks to provide proof they actually own the loan to these properties. In other words – “you’re a bank act like one.” Once this clears through the logjam and NOD’s resume then the supply/demand problem will reverse back to over supply.

    A building moratorium here would be a good for future demand and current owners, however bad for the govt because the high taxes paid by new homeowners would be lost. They gotta keep up the ponzi scheme in order to continue paying the lifetime Greek pensions.

  22. Tim

    Short term this market is definitely hot and showing an uptick in Medians/PPSF.

    Medium to long term there are over 10,000 homes in some stage of default that need to be sold or destroyed before we can return to any version of “normal”.

    A building moratorium would be the single best thing to ever happen to Reno. Long term values would rise, green space would be preserved, and quality of life would be maintained.

    The moneyed interests own the politicians, though, so it would never happen.

  23. E.Edward

    Building moratoriums, What? Who said anything about a building moratoriums? I’m talking foreclosure moratoriums of-course, which coincidentally were put in place previously and did nothing but accelerate the fall of long term prices, as we all witnessed. Agreed a building moratorium is the last thing Reno needs

    Really I think its fairly obvious to most ab284 is just another politicians legitimate way of spelling foreclosure moratorium……. {election year}!!

  24. tyler durden

    miami market rebounded 15% in 2 months
    phoenix market did same

    when replacement cost gets so far below purchase price….investors will eventually come — its washoe’s turn — get a quick 15% rebound and establish that as a bottom

    don’t expect any more form there…..crashed real estate became to underpriced (i dont care to hear about detroit—-this area has a great climate and is a desirable place)

  25. Dirtbagger

    Why a moratorium? If a builder can construct and sell a home for a profit, kudos to him. It seems that everytime there is major interference in the markets, the unintended consequences give worse outcomes than the letting the market function.

    If Fannie and Freddy had not been available for off-loading home loans then the housing bubble and subsequent collapse would most likely have been less severe.

  26. Sully

    E.Edward – exactly how many foreclosure moratoriums have you witnessed in your lifetime? I haven’t run into one before this one, so how can you make a statement that these moratoriums never work? Since shortly after the Civil War there hasn’t been much done for foreclosure proceedings other than to extend them (time wise).

    Any moratorium that disrupts supply will effect demand, so a building moratorium is little different than a foreclosure moratorium as an end result. The length of the moratorium is the killer. When the banks find a workaround and NOD’s resume then this moratorium is over. I suspect AB 284 was never intended to be a long term solution to the problem, but a temporary relief to the massive number of foreclosures.

    However, I cannot see where this bill is wrong from a legal standpoint. It does mess up the buying opportunities for the bottom feeders, but then that’s the penalty for waiting so long. BTW, before you get your panties in a twist, I’m one of the bottom feeders that is being affected by this damn bill.

  27. Question for Guy

    Guy,

    In calculating the months of inventory, it looks like you are using the actual # of monthly transactions that have occurred within a given month. Is this really a fair accurate representation of underlying demand?

    Most of the sold houses in the demand figures are still short sales, bank-owned, or otherwise non-conventional equity transactions, correct?

    What I’m getting at is that when the pre-284 closings clear through the pipeline in mid-March as projected, and the actual transactions slow to a trickle (if for no other reason than there is not enough inventory for buyers to purchase) will your calculated figure of days inventory on-hand increase simply by virtue of the using the (then fewer) actual transactions occurring as a representation the demand figure?

    If that does work out that way, should the increasing levels of inventory be taken as an indicator of market weakness or market strength at that time?

  28. E.Edward

    Your joking right Sully? You don’t remember all the lenders that suspended foreclosure proceedings? some of them voluntary. I think Bank of America even had a foreclosure moratorium of 90 days+
    Did they work…..No! Did it solve the inventory problem……No!

  29. Sully

    Suspending foreclosure proceedings voluntarily is a whole lot different than being forced to by law. However, the bottom line remains the same – show proof of ownership before foreclosing. That should be a no brainer but apparently the banks need to be told that they cannot foreclosure willy nilly on what ever it is they think they own. So that short term self imposed moratorium doesn’t quite qualify as a precedent.

  30. Rory

    H/T to Sully for “lifetime Greek pensions” comment…It’s funny because it’s true!

  31. Anon

    Of the thousands of folks foreclosed on, how many have really been foreclosed upon because of the bank’s sloppiness or carelessness? A few, I’m sure, just like any other administrative industry. And in those cases, the banks should be forced to pay a sufficiently punitive restitution. But what’s happened is that the politicians have used these few examples to appease whom they think is their at-large constituency, in an effort to further prop up the market, and in doing so have created an additional class of folks not paying their mortgages and succeeded in kicking the significant underlying shadow inventory issue forward for another day in the hops the market can ultimately absorb it. That’s a very unlikely outcome in my opinion. In cases where a bank can reasonably establish that they own the mortgage (recently imposed technicalities aside) and the owner is not paying that mortgage, the banks will need to be able to foreclose. What is the alternative, should those folks get to keep their houses free and clear going forward? Until 284 issues are resolved, the market will have an underlying drag curtailing real and sustained price appreciation, and my prediction is that as 284 is resolved, we’re going to look back at this period of tightening supply as a classic “dead-cat bounce”. 284 isn’t good for investors (unless they are looking to flip and get out already, which is always a portion of the investor market), but keep in mind that investors looking at property costs relative to rents are half of what has been keeping the market demand alive, and as availability of good deals continues to dry up with 284, investor demand will ease as well.

  32. Jennifer Fortune

    Guy, interesting thanks for sharing.

  33. Guy Johnson

    Question for Guy,
    Yes, that is how I calculate months supply of inventory (MSI), and you make a good point about number of transactions decreasing. However, might not the amount of inventory decrease in concert? I suppose we’ll see with forthcoming numbers.
    Another way to calculate MSI is to look at the number of recent sales over a longer time frame, say 60 days, or 90 days, and then divide accordingly.
    Look for March numbers to be posted soon.

  34. Guy Johnson

    Norton,
    Regarding the 126 Active non-pending listing priced between $200K and $250K in all of Reno-Sparks, what is your point exactly? (Incidentally, that number is now at 119 non-pending listings)
    If one takes the number of sales in March in that price band, one finds 63 units sold. That equates to two months supply of inventory Reno-Sparks-wide. Obviously, some neighborhoods have more some have less.
    See Inventory now measured in days, months

  35. BanteringBear

    This is all quite amusing.

  36. Burrito with everything

    Hey Guy,
    Great blog, terrific information, thanks for the wealth of discussion points:

    Here’s some questions I’ve been thinking about:

    – Do you have an estimate of how many properties in the area are not paying on their mortgage and would be foreclosed, if not for 284?

    – What % of the sales transactions currently occurring are still distressed sales, vs. equity sales? (I’m assuming distressed sales are going to be headed to essentially zero in the short term as the effects of 284 make themselves felt).

    – Of the transactions that have been clearing at the current price levels, what % would you say in your estimation have been going to investors looking solely at the rent-to-purchase price calc’s (as opposed to primary residence purchasers). And, in general, have you seen investors picking up much in the way of conventional sales, or have they been mostly feeding on the distressed sales (short sales, REO’s, court house stair auctions, etc.)?

    – Also, do you have any stats on how many of the people behind on their mortgage payments are also more than a year behind on their property taxes? If the banks can’t foreclose due to 284, but the tax assessor’s office can, that might be a way for some of the banks to recoup some of their losses and back into a foreclosure they cannot initiate themselves with 284 in place. Granted the properties won’t be fetching top dollar on the court house stairs, but after the taxman is paid the banks would still get paid something, and that might be better than waiting in limbo. Of course if the homeowners are delinquent just one year, then it might behoove them to come up with the scratch, assuming they can, rather than being put into the rental market by the County, but if some of these folks haven’t been paying their mortgage for a couple of years now as might be expected if they have ultimately anticipated losing their home to the bank, it may be doubtful that they’ve kept current on their property taxes, and a couple of years back-taxes plus interest and penalties might be too big a nut to crack in a lot of cases, or just too big of an investment in a place if there is a chance that 284 gets lifted and they might lose it sooner rather than later anyway. When do the Washoe tax assessors get busy foreclosing, is it an annual thing?

    Any thoughts or insights would be much appreciated, keep up the rocking web-site!!!

  37. Guy Johnson

    Burrito with Everything,
    I don’t have the answers to all your questions, but here is what I can tell you…

    Q: Do you have an estimate of how many properties in the area are not paying on their mortgage and would be foreclosed, if not for 284?
    A: Don’t know, but CoreLogic probably has that information.

    Q: What % of the sales transactions currently occurring are still distressed sales, vs. equity sales?
    A: SFR Sales since March 1st break out as follows…

    • REO (bank-owned): 32%
    • short sales: 34%
    • equity (non-distressed): 33%

    Q: Of the transactions that have been clearing at the current price levels, what % would you say in your estimation have been going to investors looking solely at the rent-to-purchase price calc’s (as opposed to primary residence purchasers)?
    A: This is difficult to ascertain. If we make (an overly broad) assumption that “investors” typically are cash buyers, then I can break out recent sales by cash vs. financed purchases. I’m not sure how accurate that would be, because some investors finance their purchases; and some primary residence purchasers pay all cash. That being said here is the breakout for sales since March 1st…

    • cash: 29%
    • conventional: 36%
    • FHA: 28%
    • VA: 6%

    Q: And, in general, have you seen investors picking up much in the way of conventional sales, or have they been mostly feeding on the distressed sales (short sales, REO’s, court house stair auctions, etc.)?
    A: Again, using the “investors pay cash” assumption…

    • percentage of cash purchases for REOs: 35%
    • percentage of cash purchases for short sales: 23%
    • percentage of cash purchases for equity sales: 29%

    Q: Also, do you have any stats on how many of the people behind on their mortgage payments are also more than a year behind on their property taxes?
    A: No. Not sure where to find that easily, either. Perhaps, CoreLogic.

  38. Twister

    Sounds like we went backwards on the 284 thing. I thought it was determined that the banks were controlling foreclosure flow onto the market because of accounting practices and that 284 doesnt change that, before during and after the law. If someone has another explanation as to why we arent seeing more pre AB284 foreclosures hitting the market, then it would be good to get it out there.

  39. Cal

    Burrito,
    I suggest that the best estimate of how many people have defaulted and would be subject to a NOD but for AB 284 is to go back and look at the numbers right before 284 became effective. Last September, the last month pre- 284, there were 600 NODs recorded. For the 3 months prior to 284, the average was about 500 per month. Thus, we can see the immense impact AB 284 is having. This is going to have major impact in the coming months, but not in the coming days.
    Twister, last month the banks recorded 220 NOSs and sold 198 houses on the courthouse steps. Many of those 220 NOSs will become courthouse sales this month. But the number of NOSs has been declining over the most recent months, and fewer NOSs will, of course, eventually translate to fewer courthouse sales.
    I disgaree with those who say the number of new foreclosures coming onto the MLS is going to dry up and blow away in the coming days. Yes, they are going to decline, but remember that the number of foreclosures that the banks had in the pipeline prior to AB 284 was immense, in the thousands and thousands, and I anticipate we are going to see around 150-175 new REOs a month for at least the next several months. Just note that 6 months post 284, there were still 198 REOs last month.
    Eventually, the impact of AB 284 will be to bring the number of new REOs to almost nothing. But that is several months off because of the huge backlogged foreclosures still working their way through the pipeline.

  40. lurker

    Burrito,
    Must be nice being able to pepper people with a bunch of question that you could just look up yourself. Nice.

  41. Carleton

    I agree with Cal. There are still going to be some new REOs coming on the MLS for the next several months. Every month they will likely decline in number though. (Until sometime next year when AB 284 is repealed/amended and they absolutely explode).
    The days of massive realtor starvation are not yet at hand, but I do hope Guy is being a smart squirrel and storing up some nuts for the lean times ahead.

  42. Guy Johnson

    Cal and Carelton, I’ve just posted March’s NODs, NOSs, REOs, etc. Would be interested in your take on the latest numbers.

    Carelton, regarding “storing up some nuts”, in this industry it is prudent to always have reserves – no matter what the market conditions.

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